Mubarak fights Egyptian protest with pay rise

Egypt's embattled president Hosni Mubarak tried to buy himself some time in the face of defiant street protests by vowing to boost public sector pay packets by 15 per cent.

The 82-year-old strongman met his new-look cabinet for the first time on Monday as the regime battled to get the economy moving again despite ongoing demonstrations by pro-democracy activists who have occupied Cairo's Tahrir square.

The government has been working to try to return the country to normal, but while banks have re-opened over the past 24 hours there have been long queues at many, withdrawals have been restricted, and the Egyptian pound has crashed to a six-year low.

Schools remain shut and the stock exchange which was to have reopened on Monday will now remain closed until next Sunday.

According to the official MENA news agency, the cabinet approved a plan to increase state sector salaries by 15 per cent from April and to spend another 6.5 billion Egyptian pounds ($940 million) more to boost pensions.

The raise might reassure Mr Mubarak's partisans in Egypt's large bureaucracy and security forces, but there was no sign the demonstrators, who have now spent two weeks in Tahrir Square, are ready to cede ground.

Campaigners sat under the tracks of army tanks deployed around the square, fearful that any movement by the military could be designed to drive out the protesters or abandon them to the mercy of pro-regime thugs.

Activists also kept up the pressure by barring access to the Mugamma, the heart of Egypt's bureaucracy, which dominates the square, despite dozens of people trying to gain access to get documents such as passports processed.

In a mark of the tension, protesters seized a man with a petrol can they said was trying to set the building ablaze, fearing they would be blamed, and handed him over to the troops controlling access to the square.

The Cairo bourse closed down 10 points on January 27, after 70 billion Egyptian pounds ($12 billion) was wiped off shares over two days.

On Sunday, Mr Suleiman - Mr Mubarak's key lieutenant and possible successor - tried to appease the revolt by inviting several opposition groups to join him on a panel to pilot democratic reform.

But the demonstrators were unimpressed and vowed to maintain their vigil.

Opposition parties, including the powerful Muslim Brotherhood, repeated their demand that Mr Mubarak himself must stand down or immediately delegate his powers to Mr Suleiman.

And there was scant relief for the strongman in the Western capitals where he was once hailed as a close ally and bulwark of Middle East stability.

US president Barack Obama says Egypt has changed forever since its street revolt broke out on January 25 and has called for a "representative government" in Cairo, although he stopped short of urging Mr Mubarak to quit immediately.

The government said the parties agreed to set up a committee to examine constitutional amendments by March, while an office would look at complaints over the treatment of political prisoners and loosen media curbs.

A strict emergency law would be lifted "depending on the security situation", the government said.

But Mr Suleiman refused another key demand of the opposition, saying he would not assume Mr Mubarak's powers and rule in his place during the transition.

Not all of the opposition movements involved in the revolt against Mr Mubarak's rule were present at the talks.

Former UN nuclear watchdog head and leading dissident Mohamed ElBaradei was not invited, and has criticised the talks.

The Muslim Brotherhood, still officially banned, said it had agreed to take part in the talks because it wanted to determine if the government was serious about reform, but warned the initial concessions were insufficient.

While Mr Mubarak has said he is "fed up" with leadership, he says he must stay on until September's presidential election in order to ensure stability - but the demonstrators' frustration is now finding an echo abroad.

Spain's foreign minister said the election should be brought forward, but US secretary of state Hillary Clinton warned an early election could lead to complications if opposition groups are not organised for the vote.

But this cuts little ice in Tahrir Square, where the demonstrators have kept up demands for his immediate exit and have no faith that Mr Mubarak is serious about stepping down after three decades in power.